Intraday Triangle Target Hit Overnight for SP500

Jun 29, 2010: 8:29 AM CST

In last night’s report, I highlighted the symmetrical triangle formation on the intraday charts for the S&P 500.

Interestingly enough, this morning’s sell-off in the futures resulted in the triangle price projection target being hit before the market opened, in another example of the market hitting a price target overnight.¬† Those are always interesting and often frustrating if you’re an intraday-only trader.

Let’s see the set-up:


(Click for full-size via Chart.ly)

The 5-min chart above shows the @ES futures including 30 minutes before the opening (pre-market session).

We have a symmetrical triangle that broke out slightly before Monday’s close at the 1,070 level.

The 1,070 level – coincidentally – is a key short-term level that defined bull/bear balance… and for now, the bears just tipped the scale in their favor.

That aside, the classic method for projecting a price target from a symmetrical triangle is to take the height of the triangle and then subtract that value from the breakout price of the triangle.

In quick calculation, the height was roughly 17 @ES futures points, when subtracted from the 1,070 level gives us a downside  target of 1,053.

I’ve shown examples in the past where a bull or bear flag will set-up and trigger into the close of a session and I will give the target to play for on a break… only to see that target hit overnight.

For now, watch the 1,053 level to see if we get a bounce… or if this selling swing is a more powerful impulse that overcomes the target and pushes us back to 1,045 or even lower.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

3 Comments

3 Responses to “Intraday Triangle Target Hit Overnight for SP500”

  1. Still Learning Says:

    Corey,
    Elliott wave teaches that a triangle generally forms just prior and ending move. What's your experience
    with that? If true than this move down today may be the ending move of an impulse or corrective wave. Any
    thoughts?
    Thanks for all you do….

  2. Corey Rosenbloom, CMT Says:

    That's the common wisdom, yes, but I view triangles simply as consolidation patterns that predict the potential for range expansion. We are clearly seeing the range expansion from the pattern, so that's performing as expected.

    In regard to the Elliott and triangle, my take is that the February lows in all the indexes are the reference levels to watch. If we don't bounce off those – and we could – then we're likely to see a harsh continuation of the down move rather than an end to it.

  3. N_t Says:

    Afraid to trade is a great domain for a blog about stocks. Excellent analysis today on the S&P even if it did crack below 1,053 and is now near flash crash levels. What an amazing market!

    I found Afraid to Trade several months ago and have linked to it from my own blog several times. Would you be interested in a reciprocal link? Thanks for the consideration.

    Novice_trader
    quicktradesblog.com